The argument for a minimum wage is that labor demand is inelastic -- employers will hire the same number of workers. They will just absorb the higher wages or pass along the costs to customers. Workers get all the benefit. If labor demand is elastic, employers cut back on the number of employees.Of course, labor economists would recognize that John Cochrane’s entire post assumes a perfectly competitive labor market. One has to wonder about economists who have never even considered monopsony power.
Monday, November 4, 2019
Has Tyler Cowen or John Cochrane Ever Heard of Monopsony Power?
I’m going to replicate one portion of a long winded rant about alleged cognitive dissonance:
Subscribe to:
Post Comments (Atom)
6 comments:
I've long suspected that John Cochrane's target audience is not readers who studied economics in a serious way, but rather he's actually targeting business major types with a BBA or MBA degree. In other words, readers with a passing acquaintance of microeconomics 101 that they took in their sophomore year, but went on to major in business management, accounting or marketing. They know just enough economics to be dangerous. The kind of frat brats that join Young Republican rallies.
I wrote there two words. your two words
somehow that comment is not there.
I think both John and Tyler have heard of Joan Robinson, but young students have not, and J and T are assuming that will remain the case.
Yes Joan Robinson introduced the theory generations ago. Of course some conservatives insisted for years that this theory had no application in the real world. It seems, however, a lot of recent research has shown otherwise. Tyler and John are behind on their reading it seems!
joan was a wonderful writer of ecoonmics. Very easy to understand.
Even under competitive conditions, wages and employment are not determined by the supply and demand for labor. This was shown in the Cambridge Capital Controversy. Cochrane and Cowen are not serious, but spouting nonsense.
Post a Comment